Puerto Rico Broker Pleads Guilty to Bank Fraud

Jose G. Ramirez-Arone Jr. (also known as Jose G. Ramirez, Jr.), a former UBS Financial Services of Puerto Rico (UBS-PR) broker, has pleaded guilty to criminal charges accusing him of defrauding investors while making over $1 million in improper commissions through the sale of Puerto Rico closed-end funds. Ramirez-Arone is scheduled to be sentenced next year.

The former UBS broker, known to many on the island as “Whopper,” and UBS Puerto Rico have together been the subject of dozens of Financial Industry Regulatory Authority (FINRA) arbitration complaints brought by customers claiming they sustained massive investment losses because not only did UBS and Ramirez-Arone sell the customers Puerto Rico bonds while misrepresenting the risks, but also, the finer broker recommended that they borrow money to purchase even more of these securities when they could not afford them.

Ramirez-Arone was one of the top-selling brokers at UBS Puerto Rico. In his guilty plea, Ramirez-Arone admitted that he was involved in a scam to help his UBS customers fraudulently obtain non-purpose credit lines, which was a violation of the firm’s policy. The credit lines came from UBS Bank USA, which is a UBS Financial Services subsidiary based in Utah. According to the U.S. Department of Justice, Ramirez-Arone took advantage of the low interest rates at UBS bank to convince his customers to buy additional shares of UBS’s Puerto Rico closed-end funds (CEFs). The former UBS broker acknowledged being a part of a scheme that involved recommending to different clients that they take money from the UBS Bank credit lines to invest to in the UBS Puerto Rico closed-end bond funds. Since using a “non-purpose” loan to buy additional securities is not allowed, Ramirez-Arone admitted advising customers to misrepresent on their credit line application what they intended to use the credit line and having the clients take the borrowed money to their retail bank and then bring the money back to UBS to buy more securities.

It was in 2015 that the U.S. Securities and Exchange Commission (SEC) filed civil charges against Ramirez-Arone for alleged material misrepresentations and omissions and his credit line scam involving the UBS Puerto Rico closed-end bond funds, including failing to apprise investors of the risks involved in not just the securities but also in investing in the bonds using the money they had borrowed. That is, the CEFs are already internally leveraged 2 to 1. Meaning, using lines of credit to buy CEFs involves using leverage on top of leverage; always a very risky proposition. The SEC contends that the former UBS Puerto Rico broker raised his compensation by at least $2.8 million through the fraud.

When the Puerto Rico bond market failed in 2013, Ramirez-Arone’s customers that borrowed on credit lines that he had recommended found themselves being ordered to pay down part of the loans or risk the liquidation of their investments. The investment losses for these investors, along with tens of thousands of others, have been devastating.

Puerto Rico Bond-Fraud and Closed-End Bond Fraud Claims

Ramirez-Arone’s Finra BrokerCheck record shows 77 disclosures, many of the customer complaints involving his sale of UBS bond funds. Retail investors, small businesses, retirees, and institutional investors are among those that placed their trust in UBS and Ramirez-Arone to manage their investments.

At Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm), our UBS Puerto Rico closed-end bond fund fraud lawyers are working with investors in pursuing investor claims against UBS and its brokers. We also represent clients with Puerto Rico bond fraud claims against Santander Securities, Popular Securities, and other broker-dealers. Contact SSEK Law today to request your free case consultation.